Development was halted by the Soviet occupation of Latvia in 1940 and the subsequent purge of VEF personnel.

The I-16 was of conventional monoplane layout with a Walter Sagitta supercharged air-cooled V12 engine of Czechoslovak origin, a two-bladed propeller and a low-set wing with rounded wingtips.

The prototype had fixed undercarriage with aerodynamic fairings, but production models were to have retractable landing gear.

[citation needed] In the spring of 1940 Latvian Air Force pilots made the first test flights of the VEF I-16 prototype.

After the occupation of Latvia in June 1940, the Soviet authorities ordered that all VEF aircraft be removed from Spilve Airport and, a few weeks later, all parts fabrication and assembly work was ordered suspended pending further instructions from Moscow.